India is closer to finally sealing the almost $20 billion MMRCA (medium multirole combat aircraft) project to acquire 126 French Rafale fighters, which IAF has identified as a top-priority for the Narendra Modi government.

Defence ministry sources said the final commercial negotiations for the MMRCA project, which IAF considers "critical" to retain its air combat edge against Pakistan and maintain "dissuasive deterrence" against China, can now "be wrapped up in the next three months".

In the backdrop of IAF making do with just 34 fighter squadrons, when at least 44 are required, Air Chief Marshal Arup Raha called on PM Modi on Monday, barely a few days after he briefed finance and defence minister Arun Jaitley. On Tuesday, the IAF chief will again make "a detailed presentation" to Jaitley on the operational preparedness and different modernization projects of his force.

The worry is that the final negotiations with French aviation major Dassault for the MMRCA project have proceeded at a slow pace since Rafale was "down-selected" over its rivals in January 2012.

Sources, however, said the work of three subcommittees dealing with technical maintenance (IAF will fly the fighters for 40 years), offsets (Dassault will have to plough back 50% of the contract value back into India) and transfer of technology (ToT) has now been completed.

Under the MMRCA project, the first 18 jets will come in "fly-away condition", while Hindustan Aeronautics Ltd is to manufacture 108 fighters in India over six years. In fact, after months of wrangling, Dassault and HAL could finalize the work-share agreement only in February this year, under which the defence PSU will now have a 70% role.

"With offsets, work-share, warranty, liquidity damages and other issues resolved, the CNC (contract negotiation committee) now has to settle the final costs before the draft contract can be readied for the government's final approval," said a source.

If the MMRCA project is inked in the next few months, the first 18 jets will come to India from mid-2016 onwards. The jets built by HAL, in turn, are expected to begin rolling out from 2018 onwards. HAL will initially deliver six jets per year, which will go up to 20 per year later.

When the MMRCA selection process was initiated by MoD in mid-2007, the overall project cost was pegged at Rs 42,000 crore or $10.4 billion for 126 fighters. But with inflation being factored in, it could zoom upwards of the $20 billion mark by the time it's completed.

* November 2011: Commercial bids of Eurofighter Typhoon (EADS) and French Rafale (Dassault) opened

* January 2012: Rafale declared winner (lowest bidder) on both unit cost as well as "life-cycle costs" (cost of operating the fighters over a 40-year period, with 6,000 hours of flying) (The Times of India)

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